Grumpy Inc purchased a machine on January 1, 2021, at a cost of $120,000. The machine was originally estimated to have a salvage value of $15,000 and an estimated life of 3 years. The machine is expected to produce a total of 100,000 components during its life, distributed as follows, 40,000 in 2021, 35,000 in 2022, and 25,000 in 2023.

Required:

a) Calculate the amount of depreciation to be charged in each of the three years, using each of the following methods.

i) Straight-line method

ii) Units of activity

iii) Declining balance at a rate of 200%

b) Which method results in the highest depreciation expense:

i) During the first two years?

i) Over all three years?